half year report 2019 - witan pacific investment trust · 0.5% of costs to the portfolio’s 0.5%...

HALF YEAR REPORT 2019

Witan Pacific Investment Trust plc

1 Key information

Interim management report

2 Financial summary

3 Long-term performance analysis

4 Chair’s statement

8 Portfolio information

10 Top twenty investments

11 Regulatory disclosures

Financial statements

12 Condensed income statement

13 Condensed statement of changes in equity

14 Condensed balance sheet

15 Notes to the financial statements

Information

22 Responsibility statement of the Directors

23 Information for shareholders

27 How to invest

29 Glossary

31 Directors and advisers

CONTENTS

HALF YEAR REPORT 2019 1

Strategy

Aim to outperform the Company’s

benchmark, the MSCI AC Asia Pacific

Free Index, in Sterling terms, over the

long term

Aim to increase the dividend per share

in real terms over the long term

Employ an active multi-manager

approach with the aim of adding value

and diversifying risk

Appoint independent portfolio

managers to access the wide range of

opportunities in the Asia Pacific region,

seeking capital return and income

growth

Buy back shares when the Company’s

shares are standing at a substantial and

anomalous discount to their net asset

value (“NAV”)

Control costs, seeking to maintain

ongoing charges (excluding

performance fees, if any) of 1% or less

per annum

Why choose Witan Pacific Investment

Trust?

The only UK investment trust with a

strategic focus across the entire Asia

Pacific region, including Japan, Australia

and India: investing in companies

operating within this increasingly

interdependent region

A multi-manager strategy which

involves the active management both of

portfolio managers and the allocations

to those managers, to give access to a

variety of investment styles and skills,

and a broader investment opportunity

The combination of portfolio managers

offers a portfolio of stocks reflecting

their best ideas, independent of index

weightings and aiming to balance out

some of the risks

Investment performance: a commitment

to future outperformance of the

benchmark; if outperformance is not

achieved in the period from 1 February

2019 to 31 January 2021, then

proposals will be put forward including a

full cash exit. See Chair’s Statement for

further details

Growing income: annual regular

dividends have increased in each of the

past 14 years

Governance by an experienced,

independent Board of Directors

KEY INFORMATION

The Company aims to provide shareholders with capital and income growth from a diversified portfolio of investments in the Asia Pacific region.

2 WITAN PACIFIC INVESTMENT TRUST PLC

FINANCIAL SUMMARY

Key data

31 July 2019 31 January 2019 % change

NAV per share1, 2 380.86p 352.54p 8.0%

Share price3 340.00p 303.00p 12.2%

Discount1 10.7% 14.1%

Total return

6 months 1 year 3 years 5 years

NAV per share1, 2 9.4% 2.1% 26.7% 57.7%

Share price1, 3 13.8% 6.4% 31.6% 61.7%

Benchmark4 10.5% 4.6% 36.7% 68.1%

Income

31 July 2019 31 July 2018 % change

Revenue per share 4.21p 4.71p 10.6%

Interim dividend per share 2.55p 2.50p 2.0%

Ongoing charges1 (6 months)

31 July 2019 31 July 2018

Excluding performance fees 0.54% 0.54%

Including performance fees 0.57% 0.54%

1 The financial statements (on pages 12 to 21) set out the required statutory reporting measures of the Company’s financial

performance. In addition to these, the Board assesses the Company’s performance against a range of non-statutory reporting criteria

which are viewed as particularly relevant for investment trusts (“Alternative Performance Measures”), which are summarised on pages

2 and 3. Definitions of the terms used are set out on pages 29 and 30.

2 Source: Morningstar/Witan Investment Services.

3 Source: Morningstar.

4 Source: Morningstar. The benchmark for Witan Pacific Investment Trust plc is the MSCI AC Asia Pacific Free Index Sterling.


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Total returns since inception of multi-manager structure (31 May 2005)

Cumulative return Annualised return

NAV per share1 250.4% 9.3%

Share price2 260.3% 9.5%

Benchmark3 248.8% 9.2%

10-year dividend record

20182013 2015 2016

Interim dividend

pe

nce

pe

r sh

are

2011 2012 2014 2017

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Final dividend

2019

8.0

20204

LONG-TERM PERFORMANCE ANALYSIS

1 Source: Morningstar/Witan Investment Services. Alternative Performance Measure (see pages 29 and 30).

2 Source: Morningstar. Alternative Performance Measure (see pages 29 and 30).

3 Source: Morningstar.

4 Interim dividend only.


Performance

Witan Pacific’s NAV total return per share rose by 9.4% and the share price total return rose by 13.8% over the six months ended 31 July 2019, compared with the benchmark total return of 10.5%. The overall returns experienced by our shareholders were augmented by further Sterling weakness. In US Dollar terms, for example, our benchmark rose just 2.9%. Although absolute performance was strongly positive during the period, the continued NAV underperformance against the benchmark, while marginal, is clearly disappointing, especially in light of the specific performance objective announced in the Corporate Update on 11 February 2019 (see fuller commentary on the Corporate Update in the ‘Discount, share repurchases and future developments’ section below).

Market background

After the falls in late 2018, global equities

generally recovered strongly in the period under review. US stocks led the way and rose to a record high as the Federal Reserve effectively ruled out interest rate hikes in 2019. Global growth expectations, which had declined over the course of 2018, have stabilised this year, albeit at generally lower levels. This led to growing expectations of a US interest rate cut, which materialised in late July. This more accommodative stance was mirrored by several Asian central banks (including India, South Korea, Indonesia, Malaysia, Philippines, Australia and New Zealand) to counteract signs of slowing economic activity.

Trade tensions between China and the US continued to dominate newsflow during the period. Markets in Asia remain highly sensitive to any change in stance. The rally in equity markets to the end of July more than recouped the 5.4% decline our benchmark experienced in our last financial year.

The major country components of our benchmark posted positive returns over the period, with the exception of Korea. As is often the case, there was significant country divergence in the region, with Korea the regional laggard falling by 4.9% and Taiwan (the strongest performer) rising by 20.7% and setting a new high in the process. The Korean economy, which is seen as being particularly sensitive to global trade concerns, slowed markedly and the Korean Won depreciated accordingly relative to the US Dollar. Taiwan, which has over 50% of its stock market capitalisation in technology companies, was boosted by strong demand

CHAIR’S STATEMENT


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for smartphone semiconductors driven by speedier 5G adoption. A notable performer was Taiwan Semiconductor Manufacturing Corporation, which is owned by three of our four managers and is the Company’s largest holding.

The other two strong markets were Australia and the China A Share market. Australia benefited from an election result perceived positively by the market, lower interest rates (the first rate cut since 2016) and strong performance in the mining and financial sectors, which together make up approximately 50% of its stock market.

In China, mainland stock prices recovered following the sell-off they suffered in the latter half of 2018 as Chinese authorities unveiled various stimulus measures to spur domestic demand and to fast-track certain infrastructure projects.

Our managers all have the opportunity to invest in the China A Share market and collectively have 8% invested in this market, either directly or via shares which are dual-listed in Hong Kong. The Company’s total Chinese exposure, including all Chinese companies wherever they are listed, is now 32% and is therefore the largest geographic weighting in the portfolio. This represents an overweight position versus China’s 25% benchmark weight.

Indian shares, which rose 15%, recovered from a particularly turbulent period in the autumn of 2018 when the market was impacted by a default in the shadow banking sector. The market reacted positively to Narendra Modi’s BJP Party general election

win in May, further increasing its substantial majority. However, the post-election rally was short-lived, as valuations became stretched and trade tensions resurfaced.

As Japan’s economy continues to grow at one of the slowest rates in the developed world, let alone relative to its Asian peers, it remains one of the cheapest markets globally, despite being home to a significant number of world-class global businesses. Amongst these, our managers have identified a number of attractive opportunities. Most are international businesses so have not been immune to the uncertainties surrounding global trade of the last few months which is reflected in disappointing performance for many of our Japanese holdings. The broader Japanese market gained 9.5% and therefore marginally underperformed the rest of the region over the period.

With Brexit remaining unresolved and the route to a successful outcome becoming ever more convoluted, it is hardly surprising that Asian currencies performed very strongly relative to the beleaguered Pound. Indeed, even the Korean Won, which declined by 6% versus the US Dollar over the six months, appreciated versus Sterling. The major ASEAN currencies (Philippines, Indonesia, Thailand and Malaysia) appreciated between 7% and 10% while the Japanese Yen and Indian Rupee also made significant gains of 8% and 11% respectively.

Portfolio managers

Aberdeen was the strongest of our four portfolio managers over the period, returning

HIGHLIGHTS

NAV total return of 9.4%, compared with benchmark 10.5%

Share price total return of 13.8%

Revenue per share 4.2p compared with 4.7p over the same period last year

Interim dividend increased by 2.0% to 2.55p


CHAIR’S STATEMENT continued

15.3% on a total return basis aided by stock selection successes in China and Japan. Their bottom-up approach, with an emphasis on quality companies with strong franchises and balance sheets and healthy cash flows, has found favour in these market conditions. By contrast, Matthews’ Chinese and Japanese stocks detracted from their performance, causing them to lag the benchmark with a total return of 9.0%. Dalton performed broadly in line with the benchmark, returning 11.1% with some notable successes in India, Taiwan, China and Singapore. Robeco underperformed the benchmark, with a total return of 6.1% with ongoing negative sentiment towards the more cyclical ‘value’ stocks they hold in their portfolio.

The combined portfolio produced a return of 10.0%, which represents a marginal underperformance of 0.5% when compared to the benchmark. The key factors influencing this underperformance were an underweight to the strongly performing Australian financials sector and an overweight in Korea. Stock selection was generally positive across the portfolio, but not significant enough to make up for the negative influence from the resulting geographic exposure. Adding around 0.5% of costs to the portfolio’s 0.5% underperformance results in the NAV total return being 1.1% behind the benchmark.

Portfolio review

Details of the portfolio’s key country and sector allocations, as well as the top twenty investments by size, follow this statement. The portfolio is the result of the stocks selected by our four portfolio managers and

at the end of the period was overweight China (including Hong Kong), Singapore and South Korea and underweight Japan, Australia and Taiwan. There were no significant changes in country or sector exposure in the portfolio in the last six months.

The portfolio retains an overweight (+4%) position in the Consumer Staples sector, which proved to be a small drag on performance over the period. At the same time, the underweight position in Financials (especially in Australia), Communication Services and Industrials also proved to be a short-term headwind.

Outlook

The Asia Pacific region includes many of the world’s most dynamic economies. Their increasingly affluent and better-educated populations are likely to fuel demand across various sectors providing good stock picking opportunities for our managers. In the short term, sentiment in the region will continue to be dominated by US/China tensions and affected by the protests in Hong Kong. Currency volatility (especially versus Sterling) is likely to be a factor which impacts short-term returns, especially as the next Brexit deadline approaches. The prospects for the rest of this year will depend on whether easier monetary policy sits alongside economic stability, allowing good quality companies to benefit from a benign environment and grow earnings as they have done in recent years. The question of whether cyclical ‘value’ stocks will at last start to outperform defensive or higher growth stocks is moot. This largely depends


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on whether investors continue to value the perception of dependability (at a high price) over the possibility of higher returns offered by some increasingly undervalued opportunities. Whilst our portfolio should benefit from a less polarised investment climate, we are certainly not dependent on it. Our managers build portfolios from the bottom up and the result tends to be a portfolio which is well balanced with a broad range of investments, irrespective of their corresponding weights in the benchmark we aim to outperform.

Discount, share repurchases and future

developments

In February 2019, the Board announced that “if the Company does not deliver NAV total return outperformance of its benchmark over the period from the last financial year end to 31 January 2021, the Board will put forward proposals which would include a full cash exit at close to NAV for all shareholders as soon as reasonably practicable after 31 January 2021”. This announcement does not affect how our managers invest on our behalf and the Board continues to have faith in their individual and collective ability to add value for our shareholders. We are, however, now eight months (as of 30 September 2019) into that two-year measurement period and the NAV total return is 7.4% versus a benchmark total return of 9.3%.

The share price discount to NAV narrowed from 14.1% at the start of the period to 10.7% at the period end. We continue to buy back shares when the discount at which they stand is at an anomalous and substantial

level. During the period, the Company purchased 683,481 shares at an average discount of 10.9% (net of costs), which has added approximately £270,000 of value (0.44p per share) for shareholders.

Dividend

The Board aims to increase the annual dividend per share in real terms over the long term. I am pleased to report that annual dividends have increased consistently for over 14 years at an annualised rate in excess of 14.5%. The Company has taken advantage of one of the benefits of the investment trust structure and has a healthy revenue reserve amounting to 21p per share which is available to supplement dividends to shareholders in leaner years. Revenue earnings per share of 4.2p were 10% lower than the same (exceptionally strong) period last year. Lower dividend receipts were the result of portfolio changes which involved the sale of a small number of high yield stocks. The Board proposes to pay an interim dividend of 2.55p per share. This represents an increase of 2.0% over the interim dividend paid last year.

Susan Platts-Martin

Chair2 October 2019

Company Secretary contact details:

Link Company Matters Limited

Beaufort House, 51 New North Road

Exeter EX4 4EP

email: [email protected]


Portfolio manager performance for the half year ended 31 July 2019 and from

appointment to 31 July 2019

Performance

Annualised

performance2

Appointment

date

Managed assets1 Manager

%

Benchmark

%

Manager

%

Benchmark

%£m %

Matthews 30 April 2012 95.0 40.7 +9.0 +10.5 +11.8 +10.4

Aberdeen 31 May 2005 59.7 25.5 +15.3 +10.5 +11.1 +9.2

Robeco 28 Sept 2017 57.0 24.4 +6.1 +10.5 +4.0 +7.2

Dalton 28 Sept 2017 21.9 9.4 +11.1 +10.5 +0.1 +7.2

Source: BNP Paribas. All performance figures are disclosed on a pre-fee basis.

1 Excluding cash balances held centrally by the Company.

2 Since appointment.

The Company’s portfolio by sector analysis as at 31 July 2019

PORTFOLIO INFORMATION

0 5 10 15 20 25

Other

Utilities

Communication Services

Real Estate

Materials

Information Technology

Industrials

Healthcare

Financials

Energy

Consumer Staples

Consumer Discretionary 14%

15%

6%10%

3%

3%

6%

19%

21%

6%

9%

12%

12%13%

6%7%

6%6%

4%

5%

10%

3%4%

Portfolio %1

Benchmark %2

1 Source: BNP Paribas.

2 Source: MSCI.

China/Hong Kong

Japan

India

Australia

Thailand

VietnamPhilippines

Taiwan

SouthKorea

Singapore

Indonesia

2%

1%

5%

32%

5%

6%2%

28%

10%

2%

Malaysia1%

6%

Geographical allocation

Portfolio Benchmark

at 31 July at 31 July

Country 20191 20192

Australia 6% 11%

China 21% 19%

Hong Kong 11% 6%

India 5% 5%

Indonesia 2% 1%

Japan 28% 37%

Malaysia 1% 1%

New Zealand – 1%

Philippines 1% 1%

Singapore 6% 2%

South Korea 10% 7%

Taiwan 5% 7%

Thailand 2% 2%

Vietnam 2% –

100% 100%

1 Source: BNP Paribas – Portfolio represents investments excluding cash.

2 Source: MSCI.

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Rank

Company

Country

% of total

investments

Value

£’000

1 Taiwan Semiconductor Manufacturing Taiwan 2.7 6,165

2 Samsung Electronics South Korea 2.3 5,219

3 Aberdeen Standard Indian Equity Fund India 2.2 5,034

4 AIA Group Hong Kong 1.6 3,698

5 Aberdeen Standard China A Share Equity Fund China 1.6 3,677

6 Ping An Insurance China 1.6 3,592

7 China Construction Bank China 1.5 3,452

8 Shenzhou International China 1.5 3,318

9 China Mobile Hong Kong 1.5 3,275

10 Hyundai Mobis South Korea 1.4 3,182

11 Minth Group China 1.4 3,043

12 China Petroleum (Sinopec) China 1.2 2,704

13 Hoya Corporation Japan 1.2 2,630

14 BHP Group Australia 1.1 2,557

15 United Overseas Bank Singapore 1.1 2,468

16 Anritsu Corporation Japan 1.1 2,457

17 LG Chemical South Korea 1.1 2,413

18 BGF Retail South Korea 1.0 2,294

19 Tencent Holdings China 1.0 2,232

20 Shin-Etsu Chemical Japan 1.0 2,164

Total 29.1 65,574

The value of the twenty largest holdings represents 29.1% (31 January 2019: 28.5%)

of the Company’s total investments. The full portfolio listing is published monthly (with

a three-month lag) on the Company’s website. The country shown is the country of

incorporation or, in the case of funds, the country of risk.

TOP TWENTY INVESTMENTSas at 31 July 2019


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REGULATORY DISCLOSURES

Related party transactions disclosures

During the period to 31 July 2019, related

party transactions included dividends paid

to Directors in respect of their shareholdings

in the Company. Details of Directors’

shareholdings and remuneration may be

found in the Directors’ Remuneration Report

on pages 44 to 47 of the Company’s Annual

Report for the year ended 31 January 2019.

The report is available on the Company’s

website at www.witanpacific.com.

There have been no other related party

transactions.

Principal risks and uncertainties

The Directors have considered the principal

risks and uncertainties affecting the

Company’s position. The principal risks

faced by the Company for the remaining

six months of the financial year include

financial risks relating to markets, liquidity

and credit. Market risk includes market price

risk, currency risk and interest rate risk.

Other risk categories include those relating

to business strategy, market conditions,

investment performance, reduction in

income, operational failures and tax and

regulatory changes or breaches. These risks

and the way in which they are managed

are described in more detail in the Annual

Report for the year ended 31 January 2019

in the corporate review and in the notes to

the financial statements.

The risks faced by the Company have not

changed significantly over the six months

to 31 July 2019 and are not expected to

change materially in the next six months.

The report is available on the Company’s

website at www.witanpacific.com.

Going concern

The financial statements continue to be

prepared on a going concern basis. The

approach used for the Annual Report is

applied, including proper consideration of

financial and cash flow forecasts, and it is

believed that the Company has adequate

financial resources to continue to operate

for the foreseeable future.


(Unaudited)

Half year ended

31 July 2019

(Unaudited) Half year ended 31 July 2018

(Audited) Year ended

31 January 2019

NoteRevenue

£’000

Capital

£’000

Total

£’000

Revenue £’000

Capital £’000

Total £’000

Revenue £’000

Capital £’000

Total £’000

Gains/(losses) on

investments held at fair

value through profit or

loss - 18,330 18,330 - (3,997) (3,997) - (21,782)(21,782)

Exchange losses - (66) (66) - (33) (33) - (123) (123)

Investment income 2 3,544 - 3,544 3,928 - 3,928 6,577 - 6,577

Management fees 3 (197) (593) (790) (209) (628) (837) (403) (1,210) (1,613)

Performance fees 3 - (72) (72) - - - - - -

Other expenses (473) (32) (505) (437) (23) (460) (796) (54) (850)

Net return/(loss) before

taxation 2,874 17,567 20,441 3,282 (4,681) (1,399) 5,378 (23,169)(17,791)

Taxation (267) (107) (374) (307) - (307) (424) - (424)

Net return/(loss) after

taxation 2,607 17,460 20,067 2,975 (4,681) (1,706) 4,954 (23,169)(18,215)

Return/(loss) per

Ordinary share - pence 5 4.21 28.19 32.40 4.71 (7.41) (2.70) 7.88 (36.84) (28.96)

All revenue and capital items in the above statement derive from continuing operations. The total

columns of this statement represent the Income Statement of the Company. The revenue return and

capital return columns are supplementary to this and are prepared under guidance published by the

Association of Investment Companies.

The Company had no other comprehensive income, recognised gains or losses other than those

disclosed in this statement.

CONDENSED INCOME STATEMENTfor the half year ended 31 July 2019

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CONDENSED STATEMENT OF CHANGES IN EQUITYfor the half year ended 31 July 2019

Called up

share

capital

£’000

Share

premium

account

£’000

Capital

redemption

reserve

£’000

Capital

reserves

£’000

Revenue

reserve

£’000

Total

£’000

Half year ended 31 July 2019 (unaudited)

At 1 February 2019 16,486 5 41,085 149,221 13,132 219,929

Net return after taxation and total

comprehensive income - - - 17,460 2,607 20,067

Purchase of own shares - - - (2,220) - (2,220)

Dividends paid - - - - (2,784) (2,784)

At 31 July 2019 16,486 5 41,085 164,461 12,955 234,992

Half year ended 31 July 2018 (unaudited)

At 1 February 2018 16,486 5 41,085 175,084 11,795 244,455

Net (loss)/return after taxation and total

comprehensive income - - - (4,681) 2,975 (1,706)

Purchase of own shares - - - (738) - (738)

Dividends paid - - - - (2,054) (2,054)

At 31 July 2018 16,486 5 41,085 169,665 12,716 239,957

Year ended 31 January 2019 (audited)

At 1 February 2018 16,486 5 41,085 175,084 11,795 244,455

Net (loss)/return after taxation and total

comprehensive (expense)/income - - - (23,169) 4,954 (18,215)

Purchase of own shares - - - (2,694) - (2,694)

Dividends paid - - - - (3,617) (3,617)

At 31 January 2019 16,486 5 41,085 149,221 13,132 219,929


Note

(Unaudited)

31 July

2019

£’000

(Unaudited)

31 July

2018

£’000

(Audited)

31 January

2019

£’000

Fixed assets

Investments held at fair value through profit

or loss 224,949 233,671 215,797

Current assets

Debtors 1,223 1,598 1,424

Cash at bank and in hand 10,059 6,735 4,310

11,282 8,333 5,734

Creditors

Performance fee (15) - -

Amounts falling due within one year (1,167) (2,047) (1,602)

(1,182) (2,047) (1,602)

Net current assets 10,100 6,286 4,132

Total assets less current liabilities 235,049 239,957 219,929

Provision for liabilities and charges 6 (57) - -

Net assets 234,992 239,957 219,929

Capital and reserves

Called up share capital 7 16,486 16,486 16,486

Share premium account 5 5 5

Capital redemption reserve 41,085 41,085 41,085

Capital reserves 164,461 169,665 149,221

Revenue reserve 12,955 12,716 13,132

Total shareholders’ funds 234,992 239,957 219,929

Net asset value per Ordinary share – pence 8 380.86 380.82 352.54

CONDENSED BALANCE SHEETas at 31 July 2019


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NOTES TO THE FINANCIAL STATEMENTSfor the half year ended 31 July 2019

1 Accounting policies

(a) Basis of preparation

The condensed financial statements have been prepared in accordance with Financial Reporting

Standard 104 (Interim Financial Reporting) and with the Statement of Recommended Practice

‘Financial Statements of Investment Trust Companies and Venture Capital Trusts’. They have also been

prepared on a going concern basis and on the assumption that approval as an investment trust will

continue to be granted.

The interim financial statements have been prepared using the same accounting policies as the

preceding annual financial statements.

As an investment fund, the Company has the option, which it has taken, not to present a cash flow

statement. A cash flow statement is not required when an investment fund meets all the following

conditions: substantially all of the entity’s investments are highly liquid and are carried at market value;

and where a Statement of Changes in Equity is provided.

(b) Valuation of investments

All investments have been designated upon initial recognition as fair value through profit or loss. This is

done because all investments are considered to form part of a group of financial assets which is evaluated

on a fair value basis, in accordance with the Company’s documented investment strategy, and information

about the grouping is provided internally on that basis.

Investments are recognised and de-recognised at trade date where a purchase or sale is under a

contract whose terms require delivery within the timeframe established by the market concerned, and

are measured initially at fair value. Subsequent to initial recognition, investments are valued at fair value

through profit or loss.

Listed investments have been designated by the Board as held at fair value through profit or loss and

accordingly are valued at fair value, deemed to be bid market prices for quoted investments. Investments

included in Level 2 in the Fair Value Hierarchy disclosures in note 9 consist of unlisted reportable funds

within the portfolio, Aberdeen Standard Indian Equity Fund and Aberdeen Standard China A Share Equity

Fund. These are priced daily using their net asset value, which is the fair value.

Changes in the fair value of investments held at fair value through profit or loss and gains and losses on

disposal are recognised in the Income Statement as “Gains or losses on investments held at fair value

through profit or loss”. Also included within this caption are transaction costs in relation to the purchase

or sale of investments, including the difference between the purchase price of an investment and its bid

price at the date of purchase. All purchases and sales are accounted for on a trade date basis.


2 Investment income

(Unaudited)

Half year ended

31 July

2019

£’000

(Unaudited)

Half year ended

31 July

2018

£’000

(Audited)

Year ended

31 January

2019

£’000

Income from investments held at fair value through profit or

loss:

Overseas dividends 3,434 3,717 6,235

UK dividends 83 202 311

Scrip dividends 26 9 27

Other income 1 - 4

Total income 3,544 3,928 6,577

3 Transactions with the managers

On 27 May 2005, the Company appointed Witan Investment Services Limited as Executive Manager.

Aberdeen Asset Managers Limited was appointed as portfolio manager on 31 May 2005. In April

2012, the Company appointed Matthews International Capital Management LLC. In September 2017,

the Company appointed Robeco Institutional Asset Management B.V. and Dalton Investments LLC.

Each Management Agreement can be terminated at one month’s notice in writing. Each portfolio

manager is entitled to a base management fee, at rates between 0.20% and 0.85% per annum,

calculated according to the value of the assets under their management.

Aberdeen is also entitled to a performance fee based on relative outperformance against the MSCI AC

Asia Pacific Free Index (Sterling adjusted total return). The performance fee is calculated according

to investment performance over a three-year rolling period and is payable at a rate of 15% of the

calculated outperformance relative to the benchmark (subject to a cap).

Any provisions included in the Income Statement for the half year ended 31 July 2019 are calculated

on the actual performance of the portfolio manager relative to the benchmark index. The provision

assumes that both the benchmark index remains unchanged and that the portfolio managers’ assets

under management perform in line with the benchmark index to 31 May 2020, being the date the next

performance period ends.

In addition, provisions are made where necessary for the performance periods ending 31 May 2021

and 31 May 2022, on the assumption that the portfolio manager performs in line with the benchmark

to each period end. The total of these provisions amounts to £57,000 (31 July 2018: £nil and

31 January 2019: £nil).

NOTES TO THE FINANCIAL STATEMENTS continued


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3 Transactions with the managers (continued)(Unaudited)

Half year ended

31 July

2019

£’000

(Unaudited)

Half year ended

31 July

2018

£’000

(Audited)

Year ended

31 January

2019

£’000

Charged to revenue return:

Management fee1 197 209 403

Charged to capital return:

Management fee1 593 628 1,210

Total management fees 790 837 1,613

Performance fees charged to capital return 72 - -

1 The management fees stated above include fees paid to Witan Investment Services Limited of £130,000 (six months to 31 July 2018:

£150,000 and full year to 31 January 2019: £290,000).

Management fees are charged 75% to capital return and 25% to revenue return.

The allocation percentages approximate to the split of historic returns between capital and income,

and reflect the Board’s expectation of the long-term split of returns in compliance with the Statement

of Recommended Practice ‘Financial Statements of Investment Trust Companies and Venture Capital

Trusts’. Performance fees, when payable, will be charged wholly to the capital account.

4 Dividends

An interim dividend of 2.55p per Ordinary share (2018: 2.50p) will be paid on 28 October 2019 to

shareholders on the register on 18 October 2019.



5 Return per Ordinary share

The total return per Ordinary share is based on the net gain attributable to the Ordinary shares of

£20,067,000 (half year ended 31 July 2018: loss of £1,706,000; year ended 31 January 2019: loss

of 18,215,000) and on 61,928,245 Ordinary shares (half year ended 31 July 2018: 63,175,471; year

ended 31 January 2019: 62,888,550), being the weighted average number of shares in issue during

the period.

The total return can be analysed as follows:

(Unaudited)

Half year ended

31 July

2019

£’000

(Unaudited)

Half year ended

31 July

2018

£’000

(Audited)

Year ended

31 January

2019

£’000

Revenue return 2,607 2,975 4,954

Capital return/(loss) 17,460 (4,681) (23,169)

Total return/(loss) 20,067 (1,706) (18,215)

Weighted average number of Ordinary shares in issue during

the period 61,928,245 63,175,471 62,888,550

Revenue return per Ordinary share - pence 4.21 4.71 7.88

Capital return/(loss) per Ordinary share - pence 28.19 (7.41) (36.84)

Total return/(loss) per Ordinary share - pence 32.40 (2.70) (28.96)

The Company does not have any dilutive securities.

6 Provisions for liabilities and charges

This represents the estimated performance fees payable for the three-year performance fee periods

ending 31 May 2020, 31 May 2021 and 31 May 2022. This accrual is based on actual performance

to 31 July 2019 and the assumption that the portfolio manager performs in line with the benchmark

from 31 July 2019 to the end of each fee period. Changes in the level of accrual for future

performance periods could arise for one of three principal reasons: a change in the degree of relative

performance, the time elapsed (since this would increase the proportion of the rolling three-year

performance period to which the performance calculation would be applied), or the termination of

portfolio manager’s contract.


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7 Share capital

During the half year ended 31 July 2019, 683,481 Ordinary shares were repurchased and held in

treasury, at a total cost of £2,220,000 (half year ended 31 July 2018: 224,884 Ordinary shares were

repurchased and held in treasury at a total cost of £738,000; year ended 31 January 2019: 852,346

Ordinary shares were purchased and held in treasury at a total cost of £2,694,000).

As at 31 July 2019, there were 65,944,000 Ordinary shares of 25p in issue, of which 4,244,077 were

held in treasury. Subsequent to 31 July 2019, a further 133,919 Ordinary shares were repurchased

and held in treasury, at a total cost of £447,000. As at 30 September 2019, there were 65,944,000

Ordinary shares of 25p in issue, of which 4,377,996 were held in treasury.

8 Net asset value per Ordinary share

Net asset values are based on net assets of £234,992,000 (31 July 2018: £239,957,000 and

31 January 2019: £219,929,000) and on 61,699,923 Ordinary shares in issue as at 31 July 2019

excluding shares held in treasury (31 July 2018: 63,010,866 and 31 January 2019: 62,383,404).



9 Fair value hierarchy

FRS 102 requires an entity to classify fair value measurements using a fair value hierarchy that reflects

the significance of the inputs in making the measurements. The fair value hierarchy shall have the

following classifications:

Level 1: The unadjusted quoted prices in an active market for identical assets or liabilities that

the entity can access at the measurement date.

Level 2: Inputs other than quoted prices included within Level 1 that are observable (i.e.,

developed using market data) for the asset or liability, either directly or indirectly.

Level 3: Inputs are unobservable (i.e., for which market data is unavailable) for the asset or

liability.

The financial assets and liabilities measured at fair value in the Balance Sheet are grouped into the fair

value hierarchy at the reporting date as follows:

Level 1

£’000

Level 2

£’000

Level 3

£’000

Total

£’000

Financial assets and financial liabilities at fair value

through profit or loss

As at 31 July 2019

Equity investments 216,238 8,711 - 224,949

Total 216,238 8,711 - 224,949

Level 1

£’000

Level 2

£’000

Level 3

£’000

Total

£’000

Financial assets and financial liabilities at fair value

through profit or loss

As at 31 January 2019

Equity investments 208,530 7,267 - 215,797

Total 208,530 7,267 - 215,797

The valuation techniques used by the Company are explained in the accounting policies in note 1(b).

There were no transfers during the period between Level 1 and Level 2.


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9 Fair value hierarchy (continued)

(a) Quoted equities and preference shares

The fair value of the Company’s investments in quoted equities and preference shares has been

determined by reference to their quoted bid prices at the reporting date. Quoted equities and

preference shares included in Level 1 are actively traded on recognised stock exchanges.

Investments classified as Level 2 are Aberdeen Standard Indian Equity Fund and Aberdeen Standard

China A Equity Fund (31 January 2019: same).

10 Results

The results for the half years ended 31 July 2019 and 31 July 2018, which are unaudited and were

not reviewed by the Auditors, constitute non-statutory accounts within the meaning of Section

435 of the Companies Act 2006. The latest published accounts which have been delivered to the

Registrar of Companies are for the year ended 31 January 2019; the report of the Auditors thereon

was unqualified and did not contain a statement under Section 498(2) or (3) of the Companies Act

2006. The comparative figures for the year ended 31 January 2019 have been extracted from those

accounts.


The Directors confirm, to the best of their

knowledge, that this condensed set of

financial statements has been prepared

in accordance with Financial Reporting

Standard 104 (Interim Financial Reporting)

and gives a true and fair view of the assets,

liabilities, financial position and profit

or loss of the Company, and the interim

management report (which comprises

the financial summary, the long-term

performance analysis, the Chair’s statement,

portfolio information and regulatory

disclosures) includes a fair review of the

information required by Rules 4.2.7 R and

4.2.8 R of the Disclosure Guidance and

Transparency Rules of the United Kingdom

Financial Conduct Authority.

The names and functions of the Directors

of Witan Pacific Investment Trust plc are as

listed on page 31 of this report.

This Half Year Report was approved by the

Board on 2 October 2019 and the above

responsibility statement was signed on its

behalf by:

Susan Platts-Martin

Chair

2 October 2019

RESPONSIBILITY STATEMENT OF THE DIRECTORSin respect of the Half Year Report for the six months ended 31 July 2019



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Website

The Company’s website is www.witanpacific.

com. The website provides visitors with

a comprehensive range of performance

statistics, Company information and

literature downloads. The Company’s profile

is also available on third party websites such

as www.edisoninvestmentresearch.com,

www.trustnet.com and www.morningstar.

co.uk.

Annual and Half Year Reports

Copies of the Annual and Half Year Reports

may be obtained by request through the

website.

Share price and NAV information

The Company’s Ordinary shares of 25p each

are quoted on the London Stock Exchange:

SEDOL number: 0365602

ISIN number: GB0003656021

EPIC code: WPC

The codes above may be required to access

trading information relating to the Company

on the internet.

Share price listings

The Company’s share price is listed daily in

selected national newspapers including the

The Times and The Daily Telegraph.

Electronic communications with the

Company (e-communications)

Shareholders have the opportunity to be

notified by e-mail when the Witan Pacific

Annual Report and Accounts, Half Year

Report and other formal communications

are available on the Company’s website

instead of receiving printed copies by post.

This reduces the costs to the Company as

well as having an environmental benefit in

the reduction of paper, printing, energy and

water usage.

If you have not already elected to receive

e-communications from the Company and

now wish to do so, please contact:

Computershare Investor Services PLC

The Pavilions, Bridgwater Road,

Bristol BS99 6ZY

www.computershare.com/investor/uk/

ecomms

[email protected]

0370 707 1410

You should have to hand your

shareholder reference number, which is

detailed on your certificate.

INFORMATION FOR SHAREHOLDERSShareholder communications


Association of Investment Companies

The Company is a member of the

Association of Investment Companies

www.theaic.co.uk.

Financial calendar

Year end 31 January

Annual results April

Half year results October

Annual General Meeting June

Dividends paid June & October

2019 interim dividend timetable

The interim dividend for the period ended

31 July 2019 is 2.55p per share.

Ex-dividend date 17 October 2019

Record date 18 October 2019

Payment date 28 October 2019

Company registration

Company registration number 91798.

Enquiries

Company

Secretary

WitanPacificInvestmentTrustPlc

@linkgroup.co.uk

INFORMATION FOR SHAREHOLDERS continued


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Warning to shareholders – share fraud

scams

Many companies have become aware that

their shareholders have received unsolicited

phone calls or correspondence concerning

investment matters. These are typically

from overseas-based ‘brokers’ who are very

persistent and persuasive and who target

UK shareholders, offering to sell them what

often turn out to be worthless or high risk

shares in US or UK investments.

Share fraud includes scams where investors

are called out of the blue and offered

shares that often turn out to be worthless

or non-existent, or are offered an inflated

price for shares they own. These calls come

from fraudsters operating in ‘boiler rooms’

that are mostly based abroad.

While high profits are promised, those who

buy or sell shares in this way usually lose

their money.

The Financial Conduct Authority (“FCA”)

has found most share fraud victims are

experienced investors who lose an average

of £20,000, with around £200m lost in the

UK each year.

If you are offered unsolicited investment

advice, discounted shares, a premium price

for shares you own, or free company or

research reports, you should take these

steps before handing over any money:

1. Get the name of the person and

organisation contacting you.

2. Check the Financial Services Register

at https://register.fca.org.uk to ensure

they are authorised.

3. Use the details on the Financial Services

Register to contact the firm.

4. If there are no contact details on the

Register or you are told they are out of

date, call the FCA Consumer Helpline on

0800 111 6768.

5. Search the FCA list of unauthorised firms

and individuals with whom you should

avoid any business dealings.

6. Remember: If it sounds too good to be

true, it probably is!

If you use an unauthorised firm to buy or

sell shares or other investments, you will not

have access to the Financial Ombudsman

Service or Financial Services Compensation

Scheme (“FSCS”) if things go wrong.


Report a scam

If you are approached about a share scam,

you should tell the FCA using the share

fraud reporting form at www.fca.org.uk/

consumers/scams, where you can find out

about the latest investment scams. You can

also call the Consumer Helpline on 0800

111 6768.

If you have already paid money to share

fraudsters, you should contact Action Fraud

on 0300 123 2040. Details of any share

dealing facilities that the Company endorses

will be included in Company mailings.

Please note that it is very unlikely that

either the Company or the Company’s

Registrar, Computershare Investor Services

PLC, would make unsolicited telephone

calls to shareholders. Any such calls would

relate only to official documentation already

circulated to shareholders and never in

respect of investment ‘advice’. If you are

in any doubt about an unsolicited phone

call, please contact either the Company

Secretary or the Registrar on the number

provided at the back of this Half Year

Report.

Source MSCI. The MSCI information may only be used by you as an individual for your personal use, and as a corporate organisation

for your internal use and it may not be reproduced or redisseminated in any form and may not be used as a basis for or a component

of any financial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a

recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data

and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI

information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information.

MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information

(collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy,

completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information.

Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental,

punitive, consequential (including, without limitation, lost profits) or any other damages. (www.msci.com)

INFORMATION FOR SHAREHOLDERS continued


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There are a variety of ways to invest in Witan

Pacific, however, this will largely depend

upon whether you would like financial advice

or are happy to make your own investment

decisions.

For those investors who would like advice:

Private client stockbrokers

Investors with a large lump sum to invest

may want to contact a private client

stockbroker. They will manage a portfolio of

shares on behalf of a private investor and

will offer a personalised service to meet an

individual’s particular needs. A list of private

client stockbrokers is available from the

Wealth Management Association at

www.thewma.co.uk.

Financial advisers

For investors looking to find a financial

adviser, please visit www.unbiased.co.uk.

Financial Advisers who wish to purchase

Witan Pacific for their clients can also do

so via a growing number of platforms that

offer investment trusts including Alliance

Trust Savings, Ascentric, Nucleus, Raymond

James, Seven IM, Fidelity and Transact.

For those investors who are happy to make

their own investment decisions:

Online stockbroking services

There are a number of real-time execution-

only stockbroker services which allow

private investors to trade online for

themselves, manage a portfolio and buy

UK listed shares. Online stockbroking

services that are already used by Witan

Pacific shareholders include Barclays Smart

Investor, Halifax Share Dealing, Hargreaves

Lansdown, Selftrade, Fidelity and Interactive

Investor.

Computershare

The Company’s Registrar, Computershare

Investor Services PLC, has introduced

internet and telephone share dealing

services. You will need to register at

www.computershare.trade before you

can start to trade. The telephone share

dealing service is available on 0370 703

0084. To access the internet share dealing

service, log on to www.computershare.

trade. To use these services, you will need

your shareholder reference number, which

is detailed on your certificate. Please see

their website for details on charges for this

service.

HOW TO INVEST


Witan Pacific Investment Trust plc is an

equity investment. Investors are reminded

that past performance is not a guide

to future performance and the value of

investments and the income from them

may go down as well as up and investors

may not get back the amount originally

invested. Please note that tax assumptions

may change if the law changes, and the

value of tax relief (if any) will depend upon

your individual circumstances. Investors

should consult their own tax advisers in

order to understand any applicable tax

consequences. Issued and approved by

Witan Investment Services Limited. Witan

Investment Services Limited of 14 Queen

Anne’s Gate, London SW1H 9AA is

registered in England number 5272533.

Witan Investment Services Limited provides

investment products and services and is

authorised and regulated by the Financial

Conduct Authority. We may record

telephone calls for our mutual protection

and to improve customer service.

HOW TO INVEST continued


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Net asset value per share

This is the value of total assets less all liabilities of the Company. The net asset value,

or NAV, per Ordinary share is calculated by dividing this amount by the total number of

Ordinary shares in issue (excluding those shares held in treasury).

Net asset value total return

Total return on NAV, on a cum-income value to cum-income value basis, assuming that

all dividends paid out by the Company were reinvested, without transaction costs, into

the shares of the Company at the NAV per share at the time the shares were quoted ex-

dividend.

NAV total return calculation

Half year

ended

31 July

2019

Half year

ended

31 July

2018

Year

ended

31 January

2019

Opening cum-income NAV per share (pence) 352.54 386.58 386.58 (a)

Closing cum-income NAV per share (pence) 380.86 380.82 352.54 (b)

Total dividend adjustment factor1 1.012710 1.008465 1.015617 (c)

Adjusted closing cum-income NAV per share (d = b x c) (pence) 385.70 384.00 358.00 (d)

Net asset value total return (e = d/a - 1) 9.4% -0.7% -7.4% (e)

1 The dividend adjustment factor is calculated on the assumption that the dividends paid out by the Company are reinvested into the

shares of the Company at the cum-income NAV at the ex-dividend date.

Ongoing charge

The ongoing charge reflects those expenses of a type which are likely to recur in the

foreseeable future, whether charged to capital or revenue as a collective fund, excluding

the costs of acquisition and disposal and gains or losses arising on investments. The

calculation is performed in accordance with the guidelines issued by the Association of

Investment Companies.

Premium/discount

The amount by which the market price per share is either higher (premium) or lower

(discount) than the NAV per share expressed as a percentage of the NAV per share.

GLOSSARYDefinitions of Alternative Performance Measures


GLOSSARY continued

Share price total return

Share price total return, on a last traded price to last traded price basis, assuming that

all dividends received were reinvested, without transaction costs, into the shares of the

Company at the time the shares were quoted ex-dividend.

Share price total return calculation

Half year

ended

31 July

2019

Half year

ended

31 July

2018

Year

ended

31 January

2019

Opening share price (pence) 303.00 344.00 344.00 (a)

Closing share price (pence) 340.00 327.00 303.00 (b)

Total dividend adjustment factor1 1.014107 1.009745 1.018366 (c)

Adjusted closing share price (d = b x c) (pence) 344.80 330.20 308.60 (d)

Share price total return (e = d/a - 1) 13.8% -4.0% -10.3% (e)

1 The dividend adjustment factor is calculated on the assumption that the dividends paid out by the Company are reinvested into the

shares of the Company at the last traded price quoted at the ex-dividend date.


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DIRECTORS AND ADVISERS

Directors

Susan Platts-Martin

Chair

Dermot McMeekin

Senior Independent Director and Chair

of the Nomination and Remuneration

Committee

Christopher Ralph

Independent Director

Andrew Robson

Independent Director and Chair of the Audit

Committee

All the Directors are members of both the Audit Committee and of

the Nomination and Remuneration Committee.

Executive Manager

Witan Investment Services Limited

14 Queen Anne’s Gate

London SW1H 9AA

Portfolio Managers

Aberdeen Asset Managers Limited

10 Queen’s Terrace

Aberdeen AB10 1YG

Dalton Investments LLC

1601 Cloverfield Boulevard, Suite 5050N

Santa Monica, CA 90404, USA

Matthews International Capital

Management, LLC

Four Embarcadero Center, Suite 550

San Francisco, CA 94111, USA

Robeco Institutional Asset Management B.V.

Weena 850, 3014 DA Rotterdam

The Netherlands


Company Secretary and Registered Office

Link Company Matters Limited

Beaufort House, 51 New North Road

Exeter EX4 4EP

Fund Accountants and Administrator

BNP Paribas Securities Services

10 Harewood Avenue

London NW1 6AA

Independent Auditors

Ernst & Young LLP

Chartered Accountants and Statutory Auditors

Atria One

144 Morrison Street

Edinburgh EH3 8EX

Custodian and Bankers

JPMorgan Chase Bank, N.A.

125 London Wall

London EC2Y 5AJ

The Royal Bank of Scotland plc

7th Floor, 135 Bishopsgate

London EC2M 3UR

Registrars

Computershare Investor Services PLC

The Pavilions Bridgwater Road

Bristol BS99 6ZZ

Telephone: 0370 707 1410

Facsimile: 0370 703 6101

Calls from landlines are typically charged

up to 9p per minute; calls from mobiles

typically cost between 3p and 40p per

minute.

Email: [email protected]

Website: www.investorcentre.co.uk

Broker

J.P. Morgan Cazenove

25 Bank Street, Canary Wharf

London E14 5JP

DIRECTORS AND ADVISERS continued

Printed on Cocoon 50% silk, a recycled paper containing 50% recycled waste and 50% virgin fibre.

Pulps used are elemental chlorine free process, manufactured at a mill certified with the ISO 14001

environmental management standard.

The FSC logo® identifies products which contain wood from well-managed forests certified in accordance

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half year report 2019 - witan pacific investment trust · 0.5% of costs to the portfolio’s 0.5%...

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